Hi all,

Just offering my thoughts up for discussion. Currently I am mid-20s and living with parents, due to get married end of this year. My future wife and I have been considering our future house requirments and have settled on renting for short-to-mid term.
We have seen a couple of areas that we like the look of and have been keeping an eye on sale prices and rental opportunities. The development is relatively new and most houses still sit empty. I think they started at £225k, reduced to £175k and now ive just noticed down again to £149k. At first I thought brilliant! until I worked out how much £149k is a month- approx £1k, which still seems to me way beyond what we could comfortably afford. I think we think of it now as Monolopy Money- i.e. saying it's 'only' £149k, without realising how much money £149k actually is.

There was one house in the area avail to rent a while back and it was for £500pcm inc rates. So i was thinking i'd be willing to pay a premium on the rental price to actually buy the house but when I see how much more it'd need to drop so that mortgage is about £800pcm I start to think surely it cant go that low. And I still think £800+pcm is asking a lot of us (or indeed most people), and its not like we are expecting 2 foreign holidays a year or anything. But the thing is though I personnally think that we have two fairly well paid jobs, probably above average, and always ask myself (maybe wrongly) if normal people like us cant afford it- who can? Or maybe I'm just wanting it for nothing and not willing to make sacrifices to get it?

As a youngester I vaguely remember when house prices over £75k was considered expensive, but I dont know anything of relationship of mortgage to rents. What would be considered a reasonable mortgage to pay given that you could rent for £500pm? Should I expect to pay x2 that to buy the house?

As I say, these are just my thoughts.

I think you are right to continue renting. NI does not have a supply problem like the south east of england and that will bring down the price of houses especially now all the 'investors' have stopped buying and sentiment has changed. I know of someone who has lost 50k in six months from when they bought in July. Also the assembly is hopefully going to bring in rates on empty houses which will not help those who have bought a house to speculate and are trying to sell at a silly prices. I can only see reductions for the next couple of years so you might as well pocket the difference until the rent comes down to what a interest only mortgage is or at least in the same region ie 100 quid! I would at least would expect to see the average price drop down to at
least the level of a more comparable region like the northwest england which well not cheap would still be a big drop in the average price!

Well, the simple answer is of course that houses are for most people completely unaffordable right now.

The reason why people think of the (ridiculous) prices as merely monopoly money is because up until fairly recently it has been incredibly easy to take out the most massive of mortgages irrespective of whether or not you could comfortably afford to repay it. Usually a two year 'teaser' rate makes the deal look affordable and what has often happened is that when the rate ran out, the owner remortgaged and got another low two-year rate (thanks to the increase in the value of their house). This was largely smoke and mirrors but it did give people the impression that the silly asking prices were something that they could afford to pay. The credit crunch and falling prices take away that possible crutch to prices.

The notion of average prices being around 240k was totally, utterly bonkers when average salaries were around 20k or so. I think reality is slowly starting to reassert a grip on the minds of the brainwashed public but the real shocks are yet to come, this is just the beginning of the slide downwards (house price and economy-wise). Find a decent house to rent with an owner who has had it for a while (>5 years) so that you don't get caught out by an amateur BTLer having to sell their property in an emergency, leaving you out of a place to live. Save as much as you can for the next two years and take a look at the market in 2010.

NI salaries are below the 20k im my opinion!

I agree, certainly for those people in my age bracket who are most likely to bt ftb's. I was talking to a few of my friends and they mostly get under 20k , mostly between 13k-18k, and they are graduates ( which I dont think counts for an awful lot).

I think the median is 17k. Which I think is a even better measure of how crazy prices are at the moment.
As mentioned on the other threads it has been investors that pushed the prices up amd now the houses they bought are sittting empty unrented (as the rents they are looking to cover the BTL is no where covering the IO mortgage) or up for sale without any interest.

For example I think I read somewhere on the NI Housing Executive website that a an affordable house in Lisburn is considered to be one costing 135k! current average 250k!
Housing stats:
http://www.dsdni.gov.uk/index/stats_and_re...using_stats.htm
Also this is a interesting read:
http://www.nihe.gov.uk/publications/report...ngbulletin5.pdf


From Lisburn District Plan 2006
http://www.nihe.gov.uk/publications/dp_index2007.asp

Houses will come down in price over the next few years, many on this forum believe prices in NI will drop by 20% by the end of the year. The prices are insane and completely unaffordable for the average person in NI and until they become affordable again the prices will continue to drop. Patience is the key to attaining an affordable house, it may take a few years but it will be worth the wait.



Totally agree, I even have some friends who are not graduates who earn about 12 - 10k per year.

Property bubbles are deflated from the bottom up. When FTBs cannot afford to buy, this effects the next level and so on. There will be a massive shift in opinion by late Spring/early Summer here. We are still in the denial phase, but the fear phase is rapidly approaching. Panic phase by the autumn I would think.
As far as affordibility goes, when IO mortgages equal rents, this will be the time to buy. This means prices will have to halve. Throw in a recession and we'll go further than that here. People will remember this bubble for generations

Just to further add, was watching Only Fools and Horses on tv this afternoon (one of the early ones where Dell is trying to mix it up with the Yuppies) and Mickey said to Rodney after dropping Cassandra off at her house, "Rodders, that house must be £300k". My point is, is this all swings and roundabouts? That episode was from about 80/90s and they talked about £300k houses then? Or maybe I shouldnt be using Only Fools as history lesson in British Economics.

I agree with your logic of rent=IO mortgage, I had the same rough figures in my head. altho I'd probably be willing to pay a touch extra for security of knowing I wont be ask to leave (subject to upkeep of mortgage repayments) and the [possible] long term appreciation of the value of the house.

But if we're right and rents=IO, then the prices of the area i've looked at will need to drop to approx £90k, and given its at £150k currently, which is already reduced from £225k, that's gonna be proper fall, 60%! So much for the piddly 5% falls predicted. I think it will happen tho, or get very close anyway, altho everyone else I talk to thinks i'm in la-la land.

Thank you thank you thank you.

This is what I try to say to people all the time. Nowadays people talk about 100K as if it's something they'd find in their back pocket. It's crazy. I don't have the faintest idea how anyone can buy anything these days. Well, I do sort of have an idea; they are on IO mortgages, and have no money at all left over at the end of the month.

I'd rather rent and actually have enough money left over to actually enjoy life, thank you very much.

But the thing is, there's no way I'd be able to afford anything in NI at the moment, and I'm on slightly more than the average wage and I have a deposit saved up. So what about all the people who earn say £15K or less? Do these people have any chance of ever owning their own place?

I have a friend who works full time in the Civil Service and gets something like £12K a year - how the hell is anyone supposed to live on that?

Do we have any figures on the actual number of IO mortgages in NI? Can people really have been so stupid to get one without a repayment vehicle in the hope that HPI over 20-25 years is going to save their backside when repayment time comes? And assuming they made a tidy profit from HPI, do they think it'll pay for a new, smaller place as they would all have rocketed in price too.....

And yeah, considering most people don't even have a thousand quid ready cash to their name (in fact, most people I know are carrying personal debt on top of any mortgage) the attitude to large amounts of money is amazing. People really seem to think that if they can borrow 'x' amount then they have 'x' amount. Crazy

The simple answer is very few people can afford to buy now (that is, at or near the current asking prices).

It is true (and sometimes cited as part of bull arguments) that many people, ironically, could afford to buy starter homes a year ago. The mechanics of this was simple: MEWing, i.e., borrowing (by "investors" and FTBs' parents) against the valuation of their existing houses. Or mortgages with insane income multiples, readily provided by the banks then. I have talked to quite a few people, who bought then, either for their children or for themselves, fearing to "miss the boat".

The point is it is hardly possible now. The banks don't lend 10x salary any more, are wary of sky-high valuations, and the panic buying is gone. So the laws of economics (rent vs. mortgage, as well as supply & demand) are in force once again, for a long time to come. We can't predict the dynamics of the fall, but we can be reasonably assured of the net result: rent approximately equal to IOM. Whatever the rent and the IOM is then. It can take a year, or it can take ten years, but until then you save (towards your future house!) by renting. Just keep your eyes open, to notice in time an onset of general (and rents) inflation, if any, or any other processes affecting the equation.

You've done your math right, or, at least, the same way I did in the summer of 2006, when I first started to look at the houses being sold. Prices for standard terraces were closing on £150K, rents for the same were in the £400-£450 range, and everyone believed there was a great appreciation ahead (and yes, there was). Buying was painful, with the bidding wars, gazzumping, and buyers being treated like <...> by the EAs. The rent vs. IOM calculation, however, said otherwise, and I gave up, letting specuvestors plough their money into the housing market. I think, few people will disagree now that we will be back at least to the summer 2006 prices, or close, while my deposit has grown at my landord's expense, and I have saved myself the aggravation of dealing with gazzumping sellers and nonchalant EAs.

Lots of things have changed since then, most working in our favour: property slumps in England and the Republic, the credit crunch, the rates in the UK and the Eurozone, the global property slump. Indeed , the return to normalcy will be painful, as people cannot move or split property easily on the way down, but the luckiest people now are those who don't need to sell (and haven't bought anything at the peak). Let us celebrate we haven't done the latter, and wait.

ACA. Welcome to HPC. There is a difference between think and know definitely. Where in NI, what must be a 3bed semi been reduced from £225k to £149k? Is this representative of the area or a fire sale from a developer? I am dubious for now, but would be very much obliged if you could post any link of something in the area. It's not that I completely doubt you, but there can be so much spin without substance. For example there's nothing stopping me saying a house in Malone has dropped from £1.5m to £600k. It adds fuel to the fire for some, it's important for substantiation.




Very true, hate this attitude. It will change again very quickly and the notional value of a pound/Euro will return again. One of the most boring questions at a party which I hate is "What do you do for a Living". I hate the question; it's pretentious on the part of the person asking. Trying to size you up, then blow their own trumpet with exaggeration.




Don't mean to be cold hearted but a person on £12k IMO could not afford a bus pass, let alone own a car. No one has the right to own a car, bus pass or a house. For someone earning £15k, possibly a car but no ways will someone on such a salary ever own a property, on their own? I had faced this option and emigrated to get experience elsewhere, i.e. SE England, States etc. My advise would be the same, go further a field and return some years later with the skills.

However rather than looking at the micro issues of individual salaries. Stick to the stat's, average salaries at £21,000 in Northern Ireland and £27,000 in the Republic. Whatever you think these are correct and statistically correlated.




Vespasian is right, but the market normally over shoots equalibrium. Based on current IO prices

IO on 225k property would be £1237 pcm
IO on 149k property would be £819.50 pcm

If rates fall 50 to 75 bps then IO would £745 p.c.m or £707 p.c.m... Rent of £500pcm although not impossible, I find it hard to believe. I live in the sticks of Northern Ireland, a semi 3b/r is £550 p.c.m plus. IMO as has mentioned by me in previous threads, rents during HPC cycles always increase - as property deflate in value, rents especially of £500 p.c.m will rise. I don't want to be trollish but live in reality. But zero % HPG over several years has huge affects again on affordability. Nominal pricing never drops to your magic number; it is a combination of HPC and deflation. Cycles are 14 years typically; UK is now in year II of the down cycle.

I think the OP wanted to buy a house and not rent it from the bank (which is what an IO deal is - except the bank don't come round and fix a leaky toilet!).
I have also previously posted about a house in Malone dropping from £795k to £695k and still no buyers since OCT-07. not in the same class as £225k to £149k, but significant enough for an area that many feel will weather the storm a little better than most.

There's a huge difference between a 14% discount to market and a 33% discount to market. The Property that the OP referred to may have started at £179k then reduced to £149k, which is in line with certain discounts presently under offer. The £500 p.c.m would square with this. If the house is reduced by 33% then there must be development going on beside it or some other greatly affecting factor. Unless it’s an unrealistic 2 bedroom, put on a wing and a prayer to see what would happen. I would like to know

(i) What type of Property is it? Terrace, Semi 3 B/R etc and what part of Northern Ireland?
(ii) What type of property is available to rent at £500 p.c.m?

The OP may not be illustrating similar housing stocks. Links please though would be helpful. Again it is very possible but I would like substaniation of trends. If it is then it's a real coup.

Welcome to the nut house

There are also a few people on here, who believe house prices will fall more than 50%.

I like to use the house prices/earnings ratio to work out what house prices should be.

Office of National Statistics/Nationwide - graph from their website:-

Notice the peaks in the graph coinciding with the previous known economic booms in 70's, 80's and 90's.
Notice the long term average house price according to ONS/Nationwides data (blue line) is less than 4 times income on the right-hand-side.

Why did they stop updating this graph? What are they afraid off?

I feel i'm just taking the bait here, but anyway. I searched about for the original £225k asking price, but it was at 177k for quite a while so the cached pages dont hold anything on the 225k, the closest i could find was here,

Here is the current listing on property news with both the previous £177k prices and the current £149k.

Here is the rented one i mentioned, however please note the address typed was a typo by the agent as i contacted them to find out if it was same development as willowfield, and it was.

I understand location has a lot to do with it, and being from the area I dont think there is anything wrong with the location. As with anywhere at the minute, it is not a standalone new development, as there's a few others up the road a bit. I dont know if that is enough substantiation for you on the area I refer to.

[ I've never used links before, so i hope it all works]


PS. Now that i've posted that and actually thought about it, my point in the opening post was not to spread news of a possible 33% drop in an area i was looking at, but rather to point out despite any decrease in price, the current price is still unaffordable to most. So location/type etc is really neither here nor there.

Thanks ACA. Nobody is trying to stitch anyone. It's certainly not my style. Without the link you can appreciate it’s irrelevant. Re rental property, looking at the house and the description, bedroom 3 is a box room, which you couldn't swing a cat in. Basically, this is a 2 bedroom property with a walk in wardrobe.

My thinking was it a sectarian area or an area known for anti social behavior? For instance, within the district of Rathfarnham Dublin 8 the average 4 b/room semi D's cost €795k approx. But the same type of housing stock in a nearby council estate of Whitecliff Dublin 8, which is rough but has 90% decent law abiding neighbors, sells for €325k.

I'm starting to worry that this bubble might stay inflated for generations. Houses I have been looking at in E.Belfast have been up for sale at silly prices for over a year now. Why don't they just drop the price to a realistic one and get it over with? Maybe they are holding out for the surge in 2012.

mostly because they cant.

bought house at 90k. 80k mortage. house price went upo to 120k, remorgaged to 110k, bought new kitchen, redid the garden, went skiing for two weeks and swopped the old car for a nice new ford.

house price went up to 160k, remortaged to 150k, got rid of the Ford and wheeled in a 4x4, big plasma TV yadda yadda ya.

went up to 200k, remortaged to 200k with northern rock, invested in a 150k new build apartment. Gonna be millionaires in a year.

Now the new builds are built, no one wants to rent them. No one wants to buy them. Personal credit card debts of 15k, cant sell for less than mortaged value. Only thing to do is run and hide. They are in denial.

Time will force them down.

A brilliant description of what some did! Luckily, it wasn't everybody, so we do see reductions, rolling back to, say, autumn of 2006.

As to the MEWers, what's ahead for them?

To quote yourself MD "but would be very much obliged if you could post any link of something in the area. It's not that I completely doubt you, but there can be so much spin without substance". I'm not fussed about a link, but try not to be so dismissive of posters then do the same yourself ;-)

Some people don't really like posting on a public internet forum information such as where they live and the houses they have been interested in buying. I did not find the OP comments irrelevant without a link.
The title of this thread is 'Affordability' an I think the OP got it spot on. The level of the drop is not the issue, just the fact that even with the drop he feels he still can't afford to buy.

Oh my goodness, I would not like to be in that situation!

Anecdotal alert: was speaking to someone who wants to sell (bought in mid 2006) - should be able to reduce price but can't cos of MEWing. She says that she has a very high LTV now - and I think she thinks the value is the same as it was last year!!! I think she's probably over 100% LTV at this stage - and her 2-year fix runs out this summer.

With yields so low - and some people say that they find them high - prices are just bound to come down.
nobody can actually afford to buy.

soon people will (mainstream) get it into their heads that renting is a smarter option esp. when prices drop by 10k+ per month and the macro-economic outlook doesn't inspire the confidence it has been showing over the last few years.

in saying that i know someone who is thinking of buying i Belfast.
it will take all of her salary to pay the mortgage (moving in w. b/f) - earns a respectable ~16-20k.

i can't really turnthem off the idea - they are blinkered -

I bought a brand new car in 1997 (silly mistake) and bought a 2 bedroom end terrace in 2000. Earnings 22K
Bad mistake was selling it to buy with a (now) ex

I am in exactly the same situation ACA.

We are both FTB on average wages who are interested in a local development where the overall prices on-site have dropped considerably for the last remaining properties;

prices went from October 2007=£205k-£215k to January 2007=£159k-£179k.

Other FTB and friends I speak too who are in a similar situation to our own or have (stupidly) bought in the last 12 months; have no means of making the monthly mortgage payments from their wages alone. Never mind monthly bills, rates, furniture, home improvements etc. as you said, a typical mortgage is approx £1k per month so how can we FTB afford the rest above and enjoy our lives at the same time (e.g. holidays, cars etc). I shall be honest and say we are on 'average' salaries of £18k & £14 each, which probably aint enough for us to get anything mortgage wise at the minute but as you may agree we can only possibly afford £800 p.m between us at the minute as outgoings, so we have decided to both stay at each of our parents houses for now and save approx £750 p.m until the housing market becomes more stable and affordable.

Finally can I ask you and other forum readers who are FTB:

Do you currently have a deposit for a place to buy or are you both looking at getting a 100% mortgage when the time is right?

What incomes are you both on roughly or what is your joint income?

I'm a first time buyer, most posters on this forum are FTBers

I've been saving up a deposit for about 2 years and I save most of my income each month towards the deposit. I moved back in with my parents about 2 years ago, which allowed me to save money for a deposit.

I'm willing to wait another 2 years to buy a place (I predict prices will fall around 30 - 40% over the next 2 years) Hopefully I will have saved enought then to put down a decent sized deposit.

I'm looking for a 2 bedroom place in the center of Belfast and I am not willing to pay anymore than £100k - £130k max, if prices do not come down to an affordable level then I'll move somewhere else. I'm simply not prepared to be in debt for the rest of my life because of over priced houses.

We have about £30K in the bank now, that we can deposit, and our combined salary is £55K pa (£35+£20). Strictly speaking, we're not FTBs, as we still own a (free and clear) house in the States, but we are not selling it yet (nor has it ever ridiculously appreciated, unlike those dog-kennels here), so for all practical purposes we are FTBs.

You can see that we can indeed "afford" to buy a dreary 2BR terrace in a "nice" neighbourhood, like Shankill or Falls, but... we'd rather rent a better house at half the monthly cost. We're not too fond of what is called "white trash" back in Carolina, and we like having a box-room to store our stuff

May be (praying that there be no more cheap and unlimited German credit for our An Poblacht neighbours) in time we'll be able to afford a wee semi with a box-room and a garden in a decent neighbourhood of working people (not hereditary parasites, misnamed "the working class"), like, say, Sydenham, or (can it ever happen again?) Cregagh Road... Well, I'm dreaming on... like Muhtin Lootah King da Junior:)

Good to hear from you First Time, I'm sure there are lots more out there in same boat as us.
As far as we're concerned we dont have anything like the deposits built up that some here may have- im hoping by end of year we'll have nearly 8k saved between us (wedding to consider), which prob by time you take into account buying fees involved, would only leave about 2-5% of a deposit. I know I shouldve saved more over past few years while living at home, but you learn. We'll be renting for a year or two at least anyway and hope to save what little we can during that time.

And we'd have a combined income of approx £40k.

I still think the monthly mortgage will decide house prices. £150k may sound cheap now, when compared to the £200k a few months back, but £150k still works out a lot of cash out of bank account each month. I think now that houses have stopped going up, people will realise its not even worth busting a gut to pay £1k mortgage per month for something thats not appreciating.

Altho this leads me to wonder will that affect rental demand as more ppl look to rent rather than buy (coupled with fact landlords are selling up due to falling prices), I know that this has been discussed to death on this forum somewhere. Altho from hearing some stories of ppl i know looking for a house to rent, they are finding it tough to find even affordable rent houses or even those that are in anyway decent condition (i appreciate i have only a small sample size and may not reflect whats actually happening).

I'm over 21k - can't afford to save for a deposit and can't ever see myself being able to ever afford my own home

My boyfriend and I live together (renting in Stranmillis), we are on £27K and £29K and have a fairly hefty deposit but we won't buy till some sanity comes back to the market. Until then we are quite happy where we are...

Edit: I know our incomes are a little above average for NI and we could stretch to buy now - but we'd have to borrow over 3x joint salary to get anything half decent - and anyone planning on having children at some stage should not borrow that much! I would like the option of giving up work for 3-4 years if I had children and a 3x joint mortgage would not allow me to do that.

Now that January 2008 is almost over and no properties are shifting, I am considering making a very low offer for a place nearby. Therefore, I was just wondering have any FTB reading housepricecrash.co.uk been in contact with their mortage lenders and financial advisors to even try and get a deal so that they can buy a house?

What income do fellow forum readers think would be affordable for a FTB single person to make a SUCCESSFUL mortage application at the present time? and

What income do fellow forum readers also think would be affordable for a FTB couple to make a SUCCESSFUL mortage application at the present time?

hmmm FTB2008

IMO, most people here would probably tell you not to borrow unless the 'agreed price' is 3.5x your income (or 3 x joint income).

BTW, did you read the motley fool article doccyboy posted :

http://www.fool.co.uk/news/property-home/2...sing-crash.aspx

did you read the bit about NI?

re; affordability, this may be of some use:

http://img.thisismoney.co.uk/calculators/calcMonth.html

edit - just for your info - my first house in S.E London cost me and the missus approx 2 x income, and we were at the lower end of the pay scale (it did need a bit of work though!!!)

detail:
Click to view attachment
Click to view attachment

Dude! Have some patience, fer chrissakes.



At the end of the day, it all boils down to your personal view and circumstances so do keep us posted about how you get on if you go ahead. What multiple of your income would you be looking at?

dude????
I thought FTB was a lady????


...or am I about to be laughed at on here for my stupidity

just read the Fool/MSE article.

funny that you get a range of opinions there that you just don't get here.

We are all dyed in the wool bears - don't need to be convinced and know that prices are unrealistically high.

one comment:


How funny that we here - in the NI forum can all agree (most of the time) whereas in the real Foolish world people like this are still unthinking nad unblinking.
Interestingly - he mentions that houses in Nottingham sell for ~125k and he thinks that is cheap.
Well Nottingham is the most dangerous area in England to live for violent crime and it is losing 1,000's of jobs every year as its industrial base is wiped.
too far from london too - not a great place - i used to live there and hated every minute.


the interest rates question is interesting - but that's more of a £/€, £/$, £/yen question.
in terms of affordability living is expensive by any measure.

this generation has is worse than the last.

...and I always find it difficult to take interest in postings which are made in BLOCK CAPS.

MAKES YOU APPEAR LIKE SOMEONE ON A PHONE-IN ON TALK RADIO. GRRRR...

I agree with you both - and don't you think that it's really interesting that opinion is starting to change on all the mainstream sites like MSE etc. People are not laughing at the bears any more - they are getting angry or else agreeing with our opinions. A sure sign that we are right! Ghandi's quote comes to mind...

What quote would that be?

I love the way that people on theMSE board were saying "the media is creating this fictitous house price crash - please stop"

but remember - nobody said anything about Northern Rock until they had problems.
Same with this trader who lost €6 billion.

Journalists are all a bit slow.
But listen to how they describe Northern Rock's business model today "bound to fail etc..."
these journalists are either unable to write the truth or unwilling.
Guys like david mcwilliams have been calling hte top of the market for ages now - he does get to write for the Sunday Business Post - not a prole-paper.

What the people are told and what they believe is manipulated by the media -
how much grief have some of us had over just mentioning that house prices might not always increase.
Time for my quote now from George Carlin "It's called the American dream, Because You Have To Be Asleep to Believe It"

Maybe...

"The greatness of a nation and its moral progress can be judged by the way its animals are treated."

FTB2008 go ahead if you want. Your mistake to make.

Some people who come here are just beyond our help



... first they ignore you, then they ridicule you, then they fight you, then you win.




I wonder what that says about people who found this forum and like it?

To paraphrase Yogi, 'we are smarter than the average bear!'

That's the one!

Great Minds Think Alike
And Fools Seldom Differ.

The thing is that the justification of renting vs. mortgage goes out the window when the value of the underlying asset changes.
Those that were smart saw that prices would not rise forever and acted accordingly.